Most investors like their shares to go up. But if you’re young or you’re buying for income, it’s better for them to go down.
Cheaper shares now mean higher profits later, or getting more dividend income for your money. You might feel bad about losing in the short-term, but in the long-term bear markets are good for your health.
For these reasons I genuinely shrugged off the FTSE passing briefly below 5,000 yesterday. If you want to read a blog screaming that the world is ending, I’m afraid you’ve come to the wrong place. Our chips have got cheaper!
Besides, this was a huge week in science that humbles our little efforts to get rich.
First wonder of the week: Scientists proved in a lab that the universe isn’t impossible. Yes, this is somewhat like when they proved bumblebees couldn’t fly, but I was still relieved they found more matter than anti-matter:
Researchers working on the DZero experiment observed collisions of protons and anti-protons in Fermilab’s Tevatron particle accelerator.
They found that these collisions produced pairs of matter particles slightly more often than they yielded anti-matter particles.
“Many of us felt goose bumps when we saw the result,” said Stefan Soldner-Rembold, one of the spokespeople for DZero.
“We knew we were seeing something beyond what we have seen before and beyond what current theories can explain.”
I sit easier in my chair knowing it’s not an impossibility that exists on borrowed time!
Second wonder of the week: Even as we apes try to understand the universe, US scientist Craig Venter is playing God and creating life (of sorts):
“This is the first synthetic cell that’s been made,” said genome pioneer Craig Venter, who led the research. “This is the first self-replicating species that we have had on the planet whose parent is a computer.”
Venter believes he can create new lifeforms to eat carbon dioxide or grow fuel. Worrywarts think he’ll give birth to a rampant goo that will destroy the environment.
Kids just want to know where they can get hold of this stuff.
On the personal finance blogs this week
- Money matters, your opinion doesn’t – Psy-Fi blog
- Is there value to value investing? – Simolean Sense
- Good news on UK public borrowing – David Smith
- US stocks converge on ‘six bear average’ – Money Moves Markets
- Why aren’t annuities more popular? – Morningstar (by Mike)
- Where would you save pennies if you had to? – Simple in France
- Building asset value – UK Value Investor’s Diary
- First steps in value investing – iii blog
- 12 very doable small business ideas [Updated] – Wealth Pilgrim
- An extra seven hours a week – Financial Samurai
- The Wall Street reform bill – Consumerism Commentary
- Your expensive luxury car doesn’t impress me – Len Penzo
- Happiness is not for sale – Budgets are Sexy (by Brad)
Good articles from the financial press
- Speedy new traders make waves – New York Times / Yahoo
- Fraudsters ‘suckers list’ revealed by regulator – BBC
- Europe: That sinking feeling – The Economist
- Why the English are different [free market related!] – The Economist
- Investing in farmland – FT
- Home Information Packs have been suspended – FT
- Best buy bonds for savers – Independent
- Fidelity calls for CGT rethink – Telegraph
- Mortgage lending at lowest level in a decade – Telegraph
- Cameron vows to cut taxes – someday – Telegraph
- Cash machine inventor dies – BBC
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What a great opening to the post. It reminded me of Warren Buffet’s well-known burger analogy which I – a novice investor with about 12 months experience (i.e. from the freakish bull run since spring last year) – have been frequently chanting this week to reassure myself.
“To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up, we weep. For most people, it’s the same way with everything in life they will be buying – except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.”
Hi Monevator,
Thank you for the kind link to SimoleonSense.com
I enjoy your link roundup very much.
-Miguel
I’m going to echo you and James. It is really comical when people years away from retirement bemoan the price of stocks when they drop. WTF? I don’t get it. They’re on sale, for goodness sake!
If I could find a product to produce that consumers would prefer to buy only when it wasn’t on sale, I’d be a very happy man indeed.
All the best,
Len
Len Penzo dot Com
.-= Len Penzo on: Why Your Expensive Luxury Car Doesn’t Impress Smart People. (Or Me.) =-.
Two cool science stories, and to think they discovered the universe isn’t impossible with the little collider in Chicago, what are they going to learn when the big one near you gets ramped up?
As for the synthetic life, can I get some on ebay? Sounds like it might be a good investment.
.-= LeanLifeCoach on: A Thought Experiment – Changing Roles =-.
Thanks for the link. It’s good to know the universe isn’t impossible, I was always worried that it would vanish in a puff of logic.
.-= UK Value Investor on: Building Asset Value =-.
“Even as we apes try to understand the universe” –very well put! Thanks for the perspective on low stock prices. . .and for the link.
.-= Simple in France on: Where would you pinch pennies if you had to? =-.
@LLC – Ha ha, yes, there’s been some interesting discussion in the Science press about whether we’ll see a wave of Apple and Microsoft in the 1970s style nanotechnology start-ups in garages (and bio start-ups, too). Sounds a bit frightening to me!
@Miguel – You’re welcome, thanks for stopping by.
@James – Yes, it’s very hard to better Warren, whether you’re investing or making snappy observations about the market! On that note, looks like our investing hamburgers are going to keep getting cheaper for a while, so you’ll get some more practice of hanging tough for the next few days/weeks/months/years (and always remember it can be years…)
I absolutely love bear markets. I love them more than I love bull markets. There’s more money to be made, and more capitalization to be had during those time frames. I can’t stand government interference to economic recessions.
The sheer fact that you can allocate so much shares during stock downturns is incredibly exciting for me to think about. Stop loss and puts make this kind of market all the more attractive. Securing a put when a stock comes plummeting on down like a speared dragon means insane amounts of gains. Having a good stop loss strategy is also the same. Though with the former, it’s a bit of a gamble, and the latter, it’s vulnerable to market corrections.
I never been a fan of short term up trends. It’s too speculative. I save that speculation for short term down trends, where much greater profits can be made, and stick to an overall long term dividend upwards trend.
.-= Aury (Thunderdrake) on: Hoarding Dragon Basics – The Stock Market =-.
@Aury – Yes, I think most investors are best off socking away money month in and month out, and rebalancing when their portfolio gets too out of whack or they start to feel nervous. The number who can actively trade to superior profits is vanishingly small over the long term it seems.
Thanks for the love!
.-= J. Money on: Eat Better America & J$ Wants to Give You $25.00 =-.